Thursday, August 17, 2017

What does Brexit mean for Myanmar?

Last week, the United Kingdom voted to excuse itself from the European Union – a move which has since taken a toll on financial markets worldwide, bringing the British pound to its lowest level in decades. Now that the intensely close referendum has its result, The Myanmar Times asked a variety of experts and industry figures: What will happen to Myanmar?

An investor watchs a screen in Beijing showing falling Chinese stock prices after the Brexit vote. Photo: EPAAn investor watchs a screen in Beijing showing falling Chinese stock prices after the Brexit vote. Photo: EPA

But first, a statement from the British embassy in Yangon:

“We will continue to be a close friend to Burma as it strengthens democracy, civilian government and an open economy. We are one of its greatest development partners, and our businesses and institutions are building significant ties. Burma continues to hold a special place in the hearts of British people.”

U Khin Maung Nyo, economist

I don’t see any direct impact on the Myanmar economy [as] we have low trade and investment ... with the EU and Britain. [But] we will suffer indirect impacts. If China suffers from Brexit, it will [have an] indirect impact on Myanmar.

Sean Turnell, economist

First, there are issues to do with direct UK government spending in Myanmar. The UK is a generous and important donor in Myanmar, and its programs are unusually effective and well conceived. Should there be budgetary pressures arising from Brexit, or should the UK fall into recession, then the scale of these programs might be impacted.

“Shocks” such as Brexit come at a time when the immune system of the global economy is at an especially low ebb. Should it slip into a downturn, then Myanmar’s exports could see some headwinds, as could some expected foreign direct investment.

Vicky Bowman, director of the Myanmar Centre for Responsible Business

The main impact is likely to be felt through the wider impact on the global economy, assuming Brexit prolongs the global slowdown. Myanmar is still a high-risk destination for investment, so if investors have less money and lose their risk appetite, they may choose not to invest in Myanmar.

It’s difficult at this stage to know whether Myanmar imports – for example fish or clothing – to the UK will be affected by different trade arrangements because we don’t know whether the UK will leave the single market.

Finally, it might lead to fewer British and European conflict prevention, resolution and voter education experts coming to Myanmar, since they will have the opportunity to stay home to practice their trade.

U Thet Htun Oo, executive senior manager at the Yangon Stock Exchange

I am concerned with only one point: the US dollar exchange rate.

If people’s confidence [moves] more to dollars, the dollar’s purchasing power will be higher and [the] Myanmar kyat will be weaker. 

In this case, Myanmar importers will suffer a lot [due to higher] import prices. But exporters will be happy. Myanmar is a net importer and we don’t want the Myanmar kyat too weak.

U Thura Ko Ko, YGA Capital managing director

We will need to push the UK to provide the same degree of support and aid as it had done indirectly through the EU umbrella.

In the long run … whatever agreements Myanmar and ASEAN have in place will no longer technically apply to the UK after Brexit is finalised and enacted. Myanmar – either unilaterally or as part of ASEAN – will need to negotiate and put in place the various accords and agreements it had in place or was negotiating.

In most cases, common sense should prevail and we can use the same templates the EU accords have, but it will mean Myanmar will have to negotiate new agreements which adds to the legislative burden.

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U Maung Maung Lay, UMFCCI

Myanmar is not directly affected. Though some countries may [get a] fever if the UK sneezes, Myanmar can experience some chills.

Our trade and investment with the UK or the EU are not that significant. Moreover, our capital market … [is] only local.

But, as the [EU] sanctions have been lifted and the Generalised Scheme of Preferences [has been] reinstated, Myanmar [exports] have  started to reach the EU again. Some minor adjustments have to be made with these countries when their currencies fluctuate.

But many political lessons have to be learnt regarding the Union and the ASEAN Economic Community in particular. We do not wish to see the “Disunited Kingdom” nor the “Regrexit” and a chaotic world order.

U Aung Htun, managing director of Myanmar Investments International

Nothing material [will happen] in the short-term. Myanmar is not yet a big exporter of manufactured goods, so a slowdown in the European or global economy will not have an impact. It may however impact tourism from the UK as a weaker pound makes it more expensive to come here.